ICBA Policy Resolutions for 2015Track I: Legislation and Regulation

HOME MORTGAGE DISCLOSURE ACT REFORM

Position

ICBA strongly supports expanding the exemption for compliance with the Home Mortgage Disclosure Act (HMDA) to exempt financial institutions if they originated fewer than 500 covered loans, excluding open-end lines of credit, in the previous calendar year.

ICBA opposes any CFPB efforts to expand HMDA coverage or disclosure requirements beyond what is currently required by statute.

Business and commercial credit should be exempt from HMDA reporting because most of the data field requirements are related to consumer lending.

Home equity lines of credit (HELOC) and reverse mortgage loans should not be required to be reported under HMDA as it is costly and burdensome data to collect and report and would not add greater clarity to currently required data.

HMDA data should include information consistent with the purpose of the statute and community banks should not be required to collect and report data that is not used in their mortgage lending business.

ICBA urges the CFPB to carefully consider consumer privacy issues as it moves forward with finalizing additional data submission requirements, because the collection and public disclosure of HMDA data should not be allowed to compromise consumer privacy.

ICBA opposes any requirements that banks conform their HMDA data to Mortgage Industry Standards Maintenance Organization (MISMO) format, as most community banks currently do not maintain data in this format.

ICBA supports shifting the burden to publicly disclose HMDA data from individual financial institutions to a more suitable entity such as the Federal Financial Institutions Examinations Council (FFIEC).

Background

Bank Exemption. The Home Mortgage Disclosure Act’s Regulation C requires financial institutions that meet the definition of “financial institution” to collect and report HMDA data. To better reflect the current lending environment, ICBA is urging the CFPB to increase the loan volume threshold for HMDA compliance to at least 500 covered loans, excluding open-end lines of credit. This higher threshold will provide more community banks with regulatory relief while staying true to the purpose and intent of HMDA.

Additional Reporting Requirements. Community banks should not be subject to any additional HMDA reporting requirements not already mandated by statute. Recent statutory requirements imposed the collection and reporting of 17 new HMDA data fields. The CFPB is proposing that financial institutions collect and report an additional 20 data fields beyond those included in the statute.

CFPB should not require additional loans, such as home equity lines of credit (HELOCs) and reverse mortgages, to be included in HMDA data. The benefits of including this additional data will not outweigh the costs, as community banks would face significant compliance costs to make these changes yet the data would likely provide little additional benefit or insight from what is currently required reporting. ICBA also opposes HMDA reporting requirements for business and commercial credit as this information does not provide greater clarity on housing discrimination but is burdensome for community banks to report, especially given most of the data points and new data point requirements are related to consumer lending.

ICBA opposes the CFPB or other agencies collecting or utilizing HMDA data for reasons outside of its intended purpose. HMDA data should include information consistent with the purpose of the statute and community banks should not be required to collect and report data that is not used in their mortgage lending business.

Consumer Privacy. While greater transparency can be helpful in formulating policy, it can also be dangerous for consumers and their financial health. ICBA is urging the CFPB to carefully examine potential privacy concerns with requiring additional HMDA data to be reported and disclosed, both in the HMDA report and in the public modified LAR, and not to add to the HMDA data that is already included in the public modified LAR. Given the breadth of the data proposed to be required, it will be possible to identify a particular borrower. As a consequence, private financial data about that borrower or applicant, such as levels of income and debts, credit score, age, and reasons for loan denial, among others would be revealed. In addition, special consideration about privacy should be given to community banks that serve customers in rural and underserved areas where the small number of loans and households make it even easier to identify individual borrowers.

MISMO Format. The CFPB is proposing to align many of the HMDA data requirements with the Mortgage Industry Standards Maintenance Organization (MISMO) format for residential mortgages. ICBA opposes this proposed change and believes it will only add to the compliance burden for community banks. In a September 2014 survey conducted of approximately 500 community banks, only 22 percent of the respondents answered that they maintain data in the MISMO/Uniform Loan Delivery Dataset (ULDD) compatible format. In fact, many community banks are unfamiliar with these standards. Requiring that the additional HMDA data comply with this format would greatly burden community banks that do not already maintain their data in this format, because it will require additional staff training, procedural changes, compliance time, and staff resources to make the required adjustments.

Greater Tolerances. ICBA is urging the CFPB to provide a tolerance percentage for LAR validation tests in the final HMDA rulemaking, given the changes and additional data point requirements. Community banks undertake tortuous second and third level reviews to check for reporting errors because of the outsized consequences for those errors. The current time and resources already spent on this intense review will be exponentially increased due to new data the CFPB has proposed be collected and reported. Increased tolerances for reporting errors will eliminate some regulatory burden for community banks and provide greater uniformity to the examination process.

Public Disclosure of HMDA Data. ICBA members have stated they rarely receive requests by the public for their modified loan application register (LAR). ICBA is urging the CFPB to transfer the current public LAR disclosure responsibility of the bank to the regulatory agencies, and instead make the modified public LAR a required disclosure available on the Federal Financial Institutions Examination Council’s (FFIEC’s) website. This is a more practical and efficient way to access this information and will eliminate financial institutions’ responsibility regarding the disclosure.